Senate leaders reach tentative agreement on payroll tax cut

WASHINGTON (AP) — Senate
leaders reached tentative agreement Friday night on legislation to
extend Social Security payroll tax cuts and jobless benefits for two
months while requiring President Barack Obama to accept Republican
demands for a swift decision on the fate of an oil pipeline that
promises thousands of jobs.

A vote could be held as early as Saturday on the measure, the last in a highly contentious year of divided government.

Any deal would also require House passage before it could reach Obama's desk.

Racing
to adjourn for the year, lawmakers moved quickly to clear separate
legislation avoiding a partial government shutdown threatened for
midnight.

There was no immediate response to the compromise from
the White House, which a few hours earlier had backed away from Obama's
threat to veto any bill that linked the payroll tax cut extension with a
Republican demand for a speedy decision on the 1,700-mile Keystone XL
oil pipeline proposed from Canada to Texas.

Republican senators
leaving a closed-door meeting put the price tag of the two-month package
at about $30 billion and said the cost would be covered through a fee
on mortgages backed by Fannie Mae and Freddie Mac.

The legislation
would also provide a 60-day reprieve from a scheduled 27 percent cut in
the fees paid to doctors who treat Medicare patients.

Several
officials said it would require a decision within 60 days on the
pipeline, with the president required to authorize construction unless
he determined that would not be in the national interest.

Obama
recently announced he was postponing a decision until after the 2012
elections on the much-studied proposal. Environmentalists oppose the
project, but several unions support it, putting the president in the
uncomfortable position of having to choose between customary political
allies.

Senators in both parties hastened to claim credit.

Sen.
Richard Lugar, R-Ind., issued a statement that said the compromise
included legislation he authored "that forces President Obama to make a
decision" on the pipeline.

Sen. Max Baucus, D-Mont., said he had "brokered a final deal by bringing lawmakers from both parties together to support jobs."

Officials
said that in private talks, the two sides had hoped to reach agreement
on the full one-year extension of payroll tax cuts and jobless benefits
that Obama had made the centerpiece of the jobs program he submitted to
Congress last fall.

Those efforts failed when the two sides could not agree on enough offsetting cuts to make sure the deficit wouldn't rise.

"We'll
be back discussing the same issues in a couple of months, but from our
point of view, we think the keystone pipeline is a very important
job-creating measure in the private sector that doesn't cost the
government a penny," said Sen. Mitch McConnell of Kentucky, the
Republican leader.

There was no immediate reaction from House
Speaker John Boehner. Neither he nor his aides participated in the
negotiations, although McConnell said he was optimistic about the
measure's chances for final approval.

Hours earlier, McConnell challenged Obama to give ground.

"Let's
not just pass a bill that helps people on the benefits side, let's also
include something that actually helps the private sector create the
jobs Americans need for the long term," he said.

In a political
jab, he added, "Here's an opportunity for the president to say he's not
going to let a few radical environmentalists stand in the way of a
project that would create thousands of jobs and make America more secure
at the same time."

Obama said on Dec. 7 that "any effort to try
to tie Keystone to the payroll tax cut I will reject. So everybody
should be on notice."

More recently, a veto threat issued Tuesday
against the House-passed version of the bill cited the introduction of
"ideological issues into what should be a simple debate about cutting
taxes for the middle class." Senior administration officials later told
reporters that was a reference to the pipeline.

The State
Department, in an analysis released this summer, said the project would
create up to 6,000 jobs during construction, while developer TransCanada
put the total at 20,000 in direct employment.

The 1,700-mile
pipeline would carry oil from western Canada to Texas Gulf Coast
refineries, passing through Montana, South Dakota, Nebraska, Kansas and
Oklahoma.

The spending bill would lock in cuts that conservative Republicans won from the White House and Democrats earlier in the year.

Republicans
also won their fight to block new federal regulations for light bulb
energy efficiency, coal dust in mines and clean water permits for
construction of timber roads.

After a last-minute veto threat, Republicans
abandoned attempts to block an administration policy to ease
restrictions on visits to Cuba and on the money sent to relatives on the
communist island nation from family members living in the United
States.

Additionally, the legislation bars military and economic
aid to Pakistan until the administration certifies that Islamabad is
cooperating on counterterrorism, including taking steps to prevent such
militant groups as the Haqqani network from operating in the country.

The
provision stems from concerns that the Pakistani government harbors
terrorists and from assertions that some government officials knew that
Osama bin Laden had established residence deep inside the country. Bin
Laden was killed in May by U.S. commandos who raided his fortified
compound in Abattabod.